You would be lying if you said that you are not waiting eagerly for the First Full Budget, by the First (Real) Full Majority Government, to have come in power in decades… Like me and other common men and women, you would be interested most in tax related announcements. Whether you will be able to save more taxes this year? Will you get more deductions for your home loan repayments? Or will there be no change at all? But think of it….we focus so much on saving taxes….and so little on correcting our money related common sense.
– We buy insurances to save tax!! And to top it all, we call these insurances as ‘Investments‘ under some section 80C. Ridiculous!! – We want to Invest for few months. But we Save for years. Ridiculous again!! (Why?) – Everybody wants to know the name of that next multibagger stock. But nobody is ready to put in the effort to find it. Its just like saying that everybody wants to go to heaven, but nobody wants to die. Ridiculous!!
– We want to double our money overnight. And that does not happen. But we will not understand this simple fact, unless we burn some of our hard earned money. Ridiculous!! – Currently, Indian markets are trading at almost 24X multiples (Proof in image below). But people are buying stocks like all of them are value investors. Ridiculous!! (Why?)
Nifty P/E Ratio (16-Feb-2015 to 20-Feb-2015) – Source: NSE Website
– I have this strange feeling that number of people calling themselves as Value Investors increases during Bull markets. But theoretically, this number should be more in Bear Markets. But surprisingly, its more in Bull Markets. Ridiculous!! – Everybody believed that new government had a magic wand and it will change everything in a flash. But its almost a year, and frankly speaking nothing much except talks (some are calling it false hopes) have been delivered. But markets are still making new highs every few days. Ridiculous again!! Apologize my rants 🙂
After procrastinating for months, I am finally sharing names of companies which are part of Dead Monk’s Portfolio (DMP).
But before that, here is a gentle reminder of what to expect from this portfolio.
In previous post discussing (or rather rethinking) Portfolio Structure & Composition, I mentioned that for DMP, I would stick with Core Satellite structure and a maximum of 15 stocks in the portfolio. You can read more about the reasoning here.
Structure of Dead Monk’s Portfolio
In a follow-up post deliberating the need to find more dividend paying companies & stocks from other sectors, I mentioned that most of the stock in existing DMP pay decent dividends. But just to be on a safer side, I would also keep an eye for new dividend candidates, in case I decide to kick out some of the existing stocks. There is good bad news and bad news on this front. I have removed one dividend payer – Graphite India from the core. And next bad news is that I have not found a suitable replacement for this company. 🙁 Hopefully, I would find it soon enough.
Another point to note here is that no. of stocks in DMP has been reduced from 15 to 9. This is because of one above mentioned removal, as well few more removals from satellite part of the portfolio. I have also not named specific companies in Misc (Satellite) part of the portfolio. This part deals specifically with short term and speculative bets and is more dynamic (changing) than rest of the portfolio.
Out of the 9 stocks, 7 were part of original portfolio too. Two new entrants are marked with a ‘*’.
So here are the 9 stocks –
Balmer Lawrie & Co.
Tata Investment Corporation
9 Stocks in Dead Monk’s Portfolio
I would have personally loved to add more stocks in this list to achieve higher diversification. For record, only 4 sectors namely Energy, Chemicals, Financials & FMCG are part of this portfolio. You can say that this kind of diversification may not be sufficient. But this portfolio is in line with my own risk appetite and understanding of certain sectors. I would prefer to stick with only a few companies and business which I understand rather than venturing out dangerously in areas I don’t understand. I may be missing out on potential multibaggers here. But that is a price which I am ready to pay to have a stable, ever growing portfolio of stocks which I am ready to hold for decades and not just years.
Note – You might say that this portfolio is not stable at all. It has been reworked in less than 2 years itself. Correct. It’s true that I have taken the liberty to change (reduce) the no. of stocks in the portfolio. But this is because I myself am learning newer things about myself and my personal investment psychology. I am arranging a long term portfolio around my personality rather than it being the other way round. Anyways, most of these 9 stocks were already a part of the original portfolio. So change is there, but it’s not an earth shattering one. 🙂
I have already covered about most of these companies in detail as provided in a list below.
One particular business which has seen some drastic changes in last few months is Clariant Chemicals. I am personally not very sure as to how to take a call on this one. But because of management’s proven track record and respectable dividend policy, I have decided to stick with the company for time being. But you can take a call yourself by reading my thoughts on Clariant Chemicals and also weighing the consequences of some recent developments (link).
I would leave you with these thoughts and this ‘link-heavy’ post. Rest assured that I have put most of my money where my mouth is. 😉 Do share your views about these nine companies and also share your list of stocks which you would be buying for next few decades.
No. We are not talking about your ability to suffer. We are talking about your portfolio’s ability. But how can we use the word ‘suffer’ for investments? Are these alive?
How is your portfolio’s ability to suffer and survive?
Just assume that you had to hire some bodyguards for your security. Whom would you hire? Someone who is flashy and reckless and volatile? Or someone who is stable, secure, solid and can suffer for you during hard times? You would definitely go for the latter. After all, it’s your life that is at stake. Isn’t it?
Now consider your investments. Every now and then, markets would crash and economy would take a dive. So during such tough times, where would you park your money? As far as we are concerned, we would choose instruments / stocks which are like the second type of bodyguards discussed above. Now if we want to invest in shares, we would choose companies which have the ability to suffer and survive the downturns. These companies would not become financial dinosaurs (extinct) during tough times. These would lay low and wait for the storm to pass. These would not try to do anything heroic and would focus more on survival during such times. And as soon as the bad times start to recede, these companies would spread their wings and come out leaner and stronger.
So when economy is slowing down and markets have not done anything for last 5+ years, wouldn’t it make sense to put your money in companies which can survive the downturn? Companies which have seen such downturns in the past and have come out stronger?
Companies like GE, Exxon Mobil (in American markets) have survived depressions, recessions and downturns for a reason. And the reason is their ability to suffer (& survive). Even in India, there are companies which have proved their mettle every now and then. But even then, we look for potential multibaggers; which 49 times out of 50, would not survive the next big crash.
Always remember, more wealth has been created in markets because of ‘Compounding’ and not because of ‘Multibaggers.’
(Latest Update) – You can read an updated and more detailed analysis of the PE and other ratios here.
We decided to use this insight to boost our SIPs.
For our analysis, we started with SIP of Rs 5000 every month, from January 2000 and kept on investing till December 2011. A total of Rs 7.25 Lac was invested in 145 instalments. Now we add the Boost. Whenever markets PE fell below 15, an additional Rs 5000 was invested in that month i.e. a total of Rs 10,000 was invested in that particular month. This happened in 23 of the 145 months and an extra Rs 1.15 Lac boosted the normal investment of Rs 7.25 Lac. This took total investment to Rs 8.40 Lac.
So what is the current value of the investment? Did the boost help in earning higher returns? Read further. The investment of Rs 8.40 Lac stands at a Rs 23.8 Lac. And if SIP was not boosted by Rs 1.15 Lac, it would have stood at Rs 19 Lac.
In an earlier post about timing the markets, we saw that it doesn’t make sense in trying to time the markets. If earning a better-than-average return is the aim, it is enough to invest regularly in a disciplined manner rather than trying to time the markets.
Let’s suppose that you as have decided to invest at regular intervals. This type of investment can easily be executed by means of SIP or Systematic Investment Plans.
Systematic Investment Plan (SIP) allows investment in markets at regular intervals. A normal SIP invests once every month.
Before we answer this question, we would quote an analysis from our previous post on Analysis of P/E Ratios of Indian Equity Markets. Our study suggested that whenever an investment is made with markets trading at a multiple of less than 15 (PE<15), returns over 3 and 5 years have been phenomenal.
Above data shows that on increasing our investment by 15.9% (Investing more when market is trading at lower valuations), our overall investment value increases by 25%.
But even after discussing the benefits of regular investments in markets & redundancy trying to time the markets, if you want to time the markets by investing in direct stocks, you should stick to shares of large & stable companies (Read about how to find Large Caps selling at massive Discounts!)